Thrill Ride

Foreword
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2008 Forecast, Part I
akaThrill Ride

2008 is going to be one for the record books. Like a roller coaster or thrill
ride at an amusement park, the economic and financial ups and downs will thrill
you and chill you! The opportunities in this year, and the next ten years,
are ENORMOUS and as big as ever witnessed in history as the globe evolves and
globalization unfolds. As a billion people in the G7 pay the price for their
FAILURE to learn history's lessons, ask questions of their elected officials
and demand accountability. Three billion people in the emerging world stand
poised to ascend to thriving economies and new middle classes on the recipe
of that little known economic school of thought called AUSTRIAN economics.

The transfer of wealth to the emerging world is set to accelerate as the broad
G7 character flaw known as the "something for nothing" personality drives more
and more nails into the futures of its residents. IT IS IMPOSSIBLE to figure
out what is going to unfold economically and financially without considering
the politics and broad social trends afoot around the globe. These considerations
are going to drive enormous investment trends for the next decade, and further,
as globalization plays the role of Mother Nature, the evolution of the earth
and Darwinian Theory in action. See what's unfolding, set your investment sails
properly and get immensely wealthy; invest looking in the rearview mirror and
be impoverished. In order to understand what we believe is about to transpire
we need a little setting of the current economic table to understand the coming
2008 prognostications.

We will be covering all the major sectors such as stocks, interest rates,
currencies and commodities, as well as the master thread that must be woven
into the analysis - and that is FIAT CURRENCY and CREDIT CREATION. We will
show real returns versus nominal ones. Due to "word count" constraints placed
upon me by the websites which post my work, this 2008 outlook will be spread
out over the next 3 to 4 weeks.

Now we come to the dominant pattern for 2008 courtesy of John Mauldin!

Everything will be a response to the unfolding collapse in income; the subsequent
sequence of events will be like a game of dominoes as a consequence of this
one REALITY spreading throughout the G7 economies!

Below, I have updated the chart from when it was originally published in March
of 2007 and included my commentary at the time (in italics), as it is now CRUNCH
TIME for this 50 year chart:

We are in a wolf wave, and the amplification of each wave up or down are
expanding. A chart of a wolf wave looks like a mega phone, small on one end
amplifying out. Wolves attack and eat things and it is no different with
economies and asset markets, they are eaten when a wolf appears. A good example
of a wolf wave is from John Maudlin latest letter and by extension Crestmont
Research (www.cresmontreasearch.com),
here he shows corporate profits since 1950; John can be reached at john@frontlinethoughts.com

(This chart has been updated to reflect through the 3rd quarter)

See the mega phone formation? It is called a wolf wave. We are at a fairly
good level of profits now. But it projects a nuclear winter in corporate profits
dead ahead (see chart below). From Record highs never seen in fifty years,
to record lows also not seen in the same period, below the lows of 2001-2002.
This chart is a testament to how fiat money and credit creation has made steady
growth and economic stewardship become more and more unmanageable over a long
period of time, it is clear that monetary policy is also following this wolf
wave pattern, either too hot or too cold. Politicians (and their "something
for nothing" constituents) in the western world see these enormous profits
and are set to attack the creators and holders of this wealth, they want the
money and will put in place new taxes and entitlement mandates to claw back
this gusher of wealth, thereby accelerating the downside of this wave. We all
want business cycles that cleanse past excesses but the up and downs are now
out of control, there is no consistency. No orderly form to the business and
economic cycles, everything now is either booming or busting.

Those words were prophetic in March when they were written in the first "Fingers
of Instability" series as was that chart of corporate profits (see Tedbits
Archives, this was one of the best of 2007. Read its words then look around
you today). Now we are far below the ZERO line and falling fast, so, the gusher
the public servants are telling the electorate (that they are going to CLAW
back from those greedy corporations and small businessmen, i.e. your employers
and neighbors) is now GONE. The lows are scheduled/projected to arrive at election
time, making for good decision-making doesn't it?

The reflation that will be required will be ENORMOUS, and to think every politician
in the G7 is angling to punish those EVIL corporations and small businessmen
for raising their prices to compensate for the lower value and purchasing power
of the G7 currencies in which they are priced. G7 corporate profits are only
at NOMINAL new highs; in REAL terms they are "cratering", just as you will
see in an example of stocks and bonds later in this letter.

The loss of wealth and purchasing power of the currency held by the G7
middle class in the last two years is astonishing and now approaches 40%
in REAL terms! Thank you "Pinocchio" George Bush, "Helicopter" Ben Bernanke, "Sold
the Gold" Gordon Brown, "Mandated wage increase" Angela Merkel, "Let's divide
corporate profits 1/3 to stockholders, 1/3 to labor and 1/3 to government" Nicholas
Sarkozy, et al. No wonder the electorates are up in arms in the G7! Another
round of crushing income reduction is set to materialize throughout the G7
on every level: individual, municipal, state and federal.

An unfolding "Crack up Boom" is in its infancy and must be considered as you
deploy your investment dollars. "Fingers of Instability" allow you to find
value as certain sectors implode after episodes of IRRATIONAL EXUBERANCE. Discipline
will be everything for the next year and decade. (I urge new readers to review
the Tedbits archives and learn more about "Crack up Booms", "Fingers of Instability" and
the "something for nothing" personality in the Tedbits archives at www.TraderView.com)

The world will continue to grow, and grow quite nicely, only its forms and
residency will change. Wealth will increase enormously in some places and contract
in others.

The developed G7 economies have CEASED growing in REAL terms and now only
grow in nominal ones. Rather than create wealth on the factory floor, wealth
is now manufactured with "PAPER" and asset backed economies. This is
what is driving the demise of their financial systems and the constant erosion
of their living standards. The policies of wealth creation are now a memory,
as socialism, central control of economic policies and nationalization (through
higher corporate taxes, employee mandates and smothering micromanagement via
regulations of what few wealth creating activities that still exist within
the G7) continue to grow.

They call them capitalist-free economies but it is actually central government
socialism masquerading as such, socialism is a wolf with sheep's clothing.
Spreading an ever shrinking economic pie further and further, socialism is
the definition of "Misery spread widely". Due to the misnaming of this socialism
as capitalism, the constituents of the G7 have misdirected their anger at capitalism
rather then their public servants who have destroyed the system which created
the wealth they have enjoyed for generations.

The original G7 and its "something for nothing" constituencies are the mob
at work robbing the hardiest among them (wealth creating entrepreneurs and
business) and feeding them to the weakest (desperate middle classes who don't
understand what is transpiring and the victims of their political classes who
lack knowledge of history and the financial/banking industries). These people
consume, and they eat whether they produce or not. Their moral fibers are of
made of balsa wood and are the living definition of consuming more than they
produce. The policies of insolvency on a society-wide scale, individual,
municipal, state and federal, are a black hole of capital sucking the life
out of their economies and futures and directing it into capital destructive
policies and sectors. Government is increasing in these economies where
it destroys the most: central government planning, taxes, the factory floor
and in finance and banking. They rely on anyone but themselves and increasingly
hold their governments UNaccountable.

The G7 is consuming more than they produce and exporting approximately 2
Trillion dollars of wealth on an annual basis. They are in the fall of their
empires.

The emerging world is now where wealth is created, fresh from the memories
of long socialist winters and command economies. Austrian economics and capitalism
are in the springtime of their ascendance. A huge fight is unfolding as former "emerging
world" servants of the G7 ascend to become future masters of the world economies
and wealth. They are destined to do so as they are the only place creating
wealth. There is a broad social trend at work in the emerging world and it
is: "I will work 60 hours a week for a better life for myself and my family".
This is the absolute antithesis of the "something for nothing" personality.
These people produce or they don't eat, so their moral fibers are of hardy
timber and they illustrate the definition of producing more than they consume.
These peoples' close knowledge of "government as savior" know that to be the
fallacy it is. Government is receding in these economies where it counts the
most: central government planning, taxes, the factory floor and in finance
and banking. They rely on no one but themselves but increasingly hold their
governments accountable. They are producing more than they consume and accumulating
capital and savings at a 2 trillion dollar a year pace. (See the "wealth
of the world is rotating" in the Tedbits archives at www.TraderView.com).

In addition to this mound of savings and income, capital from around the world
is pouring into the areas which are actually growing and fleeing the G7, creating
huge pressure in currency exchange rates.

In the G7 economies and developed world things are a little dicey at the moment
as their constituents are insecure and fearful of the unfolding globalization
of the world. Their public servants did not anticipate the consequences of
their previous socialist policies and now they are unprepared to compete on
a global basis. G7 Politicians and their elite banking masters have pushed
the envelope of their confiscation scheme known as FIAT money and credit creation
TOO FAR in substitution for the policies of wealth creation which their "formally" rich
societies were built upon. The deindustrialization of the developed world began
in the mid 1960's and accelerated when deficit spending upset the basis of
the Global Financial System created after WW II, known as the Bretton woods
agreements. Bretton Woods II was convened in the early 1970's when their currency's
final underpinnings of Gold and Silver reserves where severed, FOREVER. It's
been downhill ever since!

The populism running thru the streets of the G7 is a consequence of "MONEY
PRINTING" and an absence of the policies of wealth creation pure and simple.
Money is no longer backed by anything but a public servant's promise to pay.
Can you think of any other promise they deliver on? I can't, and the money
people are paid with always "melts in their hands" as their governments and
financial industries take it at night with their printing presses and credit
creation. Take a look at this chart of Money and credit creation courtesy of www.financialsense.com:

GLOBAL
MONEY SUPPLY

as of 10/04/07 Country

YOY %

Russian Fed. M2

43.71

India M3

20.15

China M2

17.06

Australia M3

16.64

Denmark M3

14.53

UK M4

13.06

Mexico M4

12.69

Brazil M2

12.37

Korea M3

9.97

OECD Total M3

8.22

Canada M3

8.15

United States, M3 reconstructed

15.07

Germany M3

6.16

Japan M4

4.22

France M3

2.72

Spain M2

1.98

Switzerland M3

0.95

Wow, using the rule of 72 we can see what's transpiring in the G7/20 and that
the emerging world is forced into huge money supply growth to "sterilize" the
massive influx of G7/20 money exports:

I could continue but the point has been made. These are economies that CONTEND
that inflation is contained and running below 4% in the developed world and
less than 6% in the emerging world. "Inflation is a policy of Government" and
constitutes a Crack up boom in its infancy. Those headline numbers
are used to fool the least informed among them and they keep the man on the
street as their fool and pawn.

A ten-year bond, certificate of deposit, or currency from these countries
are certificates of confiscation. You are GARANTEED to lose half the purchasing
power of your money or more.

Investments which supposedly provide more yields still fail to retain the
value of their initial deposit and fail to provide real returns. When long-term
interest rates are 4-6 percent and money supply is growing at 13 percent, then
the real yield on these INVESTMENTS is NEGATIVE! In the United States, a 10-year
note yields approximate 4.00 %, and M3 is growing at approximately 15.8%, so
you are getting a real return that is NEGATIVE, "compounded annually". The
last time it grew at this rate was the NIXON administration; do you remember
the "cost controls" that he implemented? In the Euro zone and the UK, the numbers
are equally UGLY! One needs look no further than the works of Milton Friedman
to see the connection between money and credit creation and the ultimate inflationary
consequences. Let's take a look at inflation (courtesy of John Williams and www.shadowstats.com,
I urge you to subscribe to this site) as it was measured PRIOR to Clinton's
presidency and all government numbers were POLITICIZED:

As you can see inflation is eating the middle class and G7 economies alive,
economic growth and interest rates are massively negative if adjusted for this
chart's message. Do you think this is limited to the US? The politicization
of all economic data in the G7 has been expanding every year since 1990. Now
lets take a look at another chart showing GDP (gross domestic product) of the
US, adjusted for these realities(courtesy of John Williams at www.shadowstats.com ).

Now we can see that REAL growth has been almost nonexistent since 1990-1991.
When you look at these two charts, you will see the middle classes' standard
of living stagnant and drifting lower over a 17-year period. Shades of Japan.
No wonder the national mood in the US and Europe is rotten, despondent and
fearful. What Americans and Europeans realize and tell pollsters is that the
government is on the wrong track. They are correct and when they vote for "change" (they
want a return to wealth generation, a la Reagan) they are unwittingly voting
for "more of the SAME". They haven't progressed in their lives and incomes
for over a decade and a half. No wonder they are frightened of immigrants to
their countries and international trade. But these realities are a result of
the Public servant's policies of de-industrialization, deficit spending, money
printing, creeping socialism and runaway government expansion. Robbing the
residents of the G7 of the ability to create and accumulate new wealth in their
lives. As this has taken place, the public has gone into debt and reduced saving
for over three decades:

The chart on the saving rates in the United States is a little dated - we
are now approximately NEGATIVE 2% as of the 4th quarter 2007. As their incomes
have stagnated or declined, G7 residents have substituted debt and quit saving
to maintain their lifestyles absent REAL income growth. Lowering interest
rates is insanity, these people need rising incomes and policies that CREATE
and REWARD wealth generation and hard work, not policies that encourage borrowing
more and saving less. By not doing so and substituting money printing and
inflation, public servants drive the middle class more and more into populous
politician's hands in desperation. Hoping to regain the ability to save and
increase wealth for retirement and their children, this is what the people
mean when they say they want change. Commentators speak of a recession
coming in 2008 that will last 1 or 2 quarters, how about the G7 in recession
since 2004?

As a result of these government policies of deficit spending and fiat monetary
and credit growth far in excess of prudent policies, investment returns are
an illusion. Here are four charts to illustrate the illusion of growth: the
German Dax stock index, the S&P 500, US ten year notes and German ten year
bonds. Side by side as measured in dollars (fake money) and gold (real money):

As you can see the rally in the DAX 30 DISSAPEARS when measured in real purchasing
power of the paper currency (FIAT IOU's) versus gold (real currency which holds
its value). Now the S&P 500:

Where are the 80% gains CNBC has been crowing about since the 2002-2003 lows?
In nominal terms stocks are rising, but in real terms they are falling in a
blistering bear market. Notice the recent resumption of the bear market as
gold moved up approximately 30% in 2007. The things you invest and store
your wealth in are VAPORIZING in value and purchasing power. That is
your wealth being eaten and confiscated by the G7 governments/central banks,
and the FINANCIAL and BANKING industry!!! Now let's look at the "RISK-FREE" rate
of return on US and German Government 10 year bonds:

Doesn't seem so safe and "RISK FREE" anymore does it? US 10-year notes have
lost half their value in purchasing power since mid 2000. That is also the
measurement of loss in purchasing power for US DOLLARS. For all you savers
out there, this is exactly where the government and G7 banking systems wish
you to be and it does not matter whether you are talking the political LEFT
OR RIGHT. Last but not least, let's look at German 10-year Bunds:

WOW, over 50% loss in purchasing power in Euros as well - in just 6
years. Would you call this RISK FREE? I speak with people all the
time whose wives insist they keep their money safe in the bank. They know
not of what they speak, they are destroying themselves and doing exactly
the opposite of their intentions of being safe. Sitting ducks for the central
banks and financial systems in which they reside. What a laugh, or should
I say CRY!

The mass illusions of growth foisted on the public through misstatement
of economic statistics are unbelievable. This period will be written about
and studied for generations. When we go through the 2008 outlook you must
keep this in mind. What we see here is only the warm up for what's about
to transpire in 2008. Money and credit supply growth are about to accelerate
from these levels in the ongoing reflation of the G7 Economies, financial
and banking systems! PUBLIC SERVANTS, CENTRAL BANKERS and the G7 financial
systems are perpetrating a fraud upon their constituents. Many commentators
say fiat currencies are nothing to concern yourself with. I BEG TO DIFFER!!!
GOT GOLD?

In conclusion, short circuiting the printing and credit creation machines
is your first priority in 2008. You can't make money till you stop losing
it. Many are saying this is the year of the collapse of the banking system
in the G7! NO WAY! There is TOO much REAL wealth generation occurring in
the emerging world for a collapse to occur at this time. There are trillions
and trillions of Dollars, Pounds, Euros, Yen, etc. awash in the world and
they are looking for a home while the Securitization Business and over-the-counter
Derivative Market are "closed for renovation."

In the developed world, the public servants and their constituents are
voting for more money printing, socialism and government intervention (which
is what has caused the mess they are in today), while in the emerging world
and the BRIC's(Brazil, Russia, India and China) they are demanding more wealth
creation and capitalism. Which policies do you think will PRODUCE more wealth
for their respective areas?

The G7 bank's reserves and balance sheets are gone but there is plenty
of paper to fill them at the right price and we will discover what that price
is over the next year. Look no further than the takeover of Countrywide Mortgage.
Many people thought Bank of America should have taken them out of Bankruptcy,
NO WAY. The financial authorities didn't want to see the ghosts of Northern
Rock's "run on the bank" on the cover of every newspaper in the United States:
Countrywide Owns Thrifts. The financial authorities avoided the panic and
quietly wrapped the maneuver in a private "Bernanke" put. Up next? Washington
Mutual!

"Volatility is opportunity" and it is about to SOAR! (As you will see in
the next installment of the 2008 Outlook) They will "Print the money" as
the unfolding "Crack up Boom" powers generational moves in grains, commodities,
currencies, and stocks are on the table. Nothing can go down NOMINALLY
for long, in the face of the money creation that is about to unfold, on top
of that which is already taking place! Bernanke promised this money creation
in his speech just last week! His words could not have been clearer!

Do not be frightened, these are enormous opportunities. Recognize them
and prosper. There is nothing you can do but understand them, figure out
the methodologies to capture the opportunities within them and ride them
for all they are worth. If you are not making money and a good deal of progress
in your investments in the last 6 weeks and 6 months you know what to do.
MORE HOMEWORK! Figure out why and make the adjustments. If your financial
and investment advisor offers you no solutions except those that have failed
you since the 2002 lows, then find one that will!!! If you enjoyed Tedbits
send it to a friend, subscribe its free at www.TraderView.com P.S
don't miss the next installment of the 2008 Outlook, it will be released
Monday morning and will reveal a coming explosion!

Ty Andros & Tedbits LIVE on web TV. Don't miss Ty interviewed live
by Michael Yorba from Commodity Classics every week discussing this week's
commentary and unfolding news. Catch the show every Wednesday at www.YORBA.tv or www.CommodityClassics.com at
4:15pm Central Standard Time. Archived video casts are available there
as well.

Tedbits is authored by Theodore "Ty" Andros, and is registered with TraderView,
a registered CTA (Commodity Trading Advisor) and TraderVest Clearing LLC a
GIB (Guaranteed Introducing Broker). He currently is the principle of TraderView,
a managed futures and alternative investment boutique. Mr. Andros began his
commodity career in the early 1980's and became a managed futures specialist
beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio
selection and monitoring, customer relations and all aspects required in building
a successful managed futures and alternative investment brokerage service.
Mr. Andros attended the University of San Diego, and the University of Miami,
majoring in Marketing, Economics and Business Administration. He began his
career as a broker in 1983, and has worked his way to the creation of TraderView
of which he is the CEO. Mr. Andros is active in Economic analysis and
brings this information and analysis to his clients on a regular basis. Ty
prides himself on his personal preparation for the markets as they unfold.
Developing a loyal clientele.

For greater insight into the philosophy behind Tedbits, have a look at
the Tedbits Overview -
To help understand our mission in serving you, the TedBits Overview gives
a broad description of what's unfolding globally and what you can expect
from Tedbits as a regular reader.

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